Revenue audit of telcos; SC seeks responses from Centre, CAG

The Supreme Court today sought responses from the Centre and Comptroller and Auditor General of India (CAG) on two separate pleas of private telecom majors against a Delhi High Court verdict holding that the top auditor was empowered to conduct revenue audits of the firms.

The bench comprising justices K S Radhakrishnan and Vikramajit Sen, which also issued a notice to the Telecom Regulatory Authority of India (TRAI), said "the issue relates to the important question of law and requires hearing. Fix it for hearing on February 11."

Senior advocate Harish Salve, appearing for telecom firms, said "the (HC) judgement is erroneous. The accounts of private firms cannot be audited by CAG under section of 16 of the CAG Act."

He also said that "meanwhile, no coercive action be taken against the petitioners (telecom companies)."

The counsel, appearing for the Centre, opposed the plea of telecom operators saying in a private-public partnership ventures, the revenue generated by the licensees are required to be shared with the central government as per the licences agreements and the High Court had rightly held that their revenue audits can be done by CAG.

He also told the court that no coercive action would be taken against the telecom firms till the next date of hearing.

Salve referred to the CAG provision and said by the logic given by the high court, every individual income tax assesse, who contributes to the consolidated fund of the Union, can be subjected to CAG audit.

"This is a wrong interpretation," he said.

Association of Unified Telecom Service Providers (AUTSP) and Cellular Operators Association of India (COAI), in their pleas, have sought setting aside of the High Court verdict.

They have also sought an interim stay on the operation of the order of their CAG audit.

The High Court had upheld the validity of laws empowering CAG to conduct revenue audits of private telecom firms.

As per the terms of license agreements, the telecom firms had undertaken the accounting responsibility on behalf of the Centre also and their accounts, in relation to revenue receipts, can be termed as the accounts of the central government and hence, they would be the subject matter of CAG's audit, the High Court had said.